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The dust has yet to settle following the European election results and there is much that remains to be decided. Indeed today (28 May) the Conference of Presidents (European Parliament President + chairmen of the political groups) discuss the formation of coalitions and nomination of a common Spitzenkandidat. There is also an informal EU leaders summit to discuss top appointments, including European Commission (EC) President.

Despite the uncertainties however, we can already assess how well the Groups have done and what this means for future coalition building and crucially, for the nomination of a common European Parliament (EP) candidate for EC.

1.What do the numbers tell us?

Key observations/analysis in critical Member States:

Germany

France

UK

Italy

Spain

Netherlands

What is the impact for business and what can we predict about future coalition building on policy?

What is the impact on the choice for a common Spitzenkandidat?

What is the impact for Parliament’s key business committees and which former Commissioners, now MEPs, are likely to join these?

Next steps

1. What do the numbers tell us?

For the first time, the two biggest groups (EPP – centre-right and S&D – centre-left) don’t have an absolute majority together. The two “winners”, who achieved the biggest breakthrough, are the Liberals (ALDE) and the Greens, who will be the king-makers in the upcoming negotiations affecting political group formations, the choice of EC President and future policy initiatives.

The Liberals (including French President Macron’s la République en Marche (LREM)) gained 107 MEPs up from 67 in 2014 (+42), meaning that they are now the third largest group (they were previously the fourth); and

The Greens gained 69 MEPs, up from 50 in 2014 (+19), which is their largest number of MEPs ever, thanks to significant victories in Germany and, to a lesser extent, France. They are now the fourth political force in the EP (provided that the Eurosceptics remain divided into two groups).

Although significant, the rise in representation of the far-right/Eurosceptic parties is not as overwhelming as anticipated. For now, these MEPs are distributed in two groups:

The Europe of Nations and Freedom Group (ENF): The ENF, previously the smaller of the two groupings, includes inter alia France’s Rassemblement National (RN) (led by Marine Le Pen and winner of the most seats in France) and Italian Interior Minister Matteo Salvini’s Lega. Due to the success of these national parties (Austria’s FPÖ and the Netherlands’ PVV did less than expected), the ENF group is now the sixth largest group with 58 seats – four ahead of the other Eurosceptic party; and

The Europe of Freedom and Direct Democracy Group (EFDD): While Germany’s AfD saw a significant increase in support and the Brexit Party stormed to victory in the UK, the EFDD did less well than expected, particularly with the relatively poor result from Italy’s 5-Star Movement, and ended up with 54 seats.

There has been significant press coverage around the formation of a strong Eurosceptic alliance into a single grouping but it is as yet unclear whether this will happen. Due to their nationalism and divergences on key issues like Russia and the economy, this will be difficult. However, these two parties will most likely vote together on strategic issues and together, they represent 112 MEPs, giving them ample weight to obstruct the Commission’s priorities. In addition, new parties entering the Parliament for the first time, such as Spanish far-right party Vox, are likely to join one of the two Eurosceptic groupings. ENF/EFDD might also be able to ally with right-leaning parties that are members of other groups (such as the ECR) on specific issues such as migration, security and civil liberties.

As expected, this means that finding a governing majority in the EP will be harder than ever before. Here we look at some options (the EP has a handy majority calculator):

A pro-European/centrist coalition, comprising EPP, S&D and ALDE, which would have an absolute majority with 434 seats.

What about the Greens: will they join such an EPP, ALDE and S&D majority? With their 69 MEPs, they will certainly have the power to shift votes and to push forward their ecological agenda. Such a coalition would give them 503 MEPs, i.e. a landslide majority. Although it’s numerically possible for an EPP, ALDE and S&D coalition to ignore the Greens, it remains to be seen whether this would be politically sensible; and

Other options:

a left-leaning alliance of S&D, ALDE, Greens and GUE: 365 seats – falling short of the absolute majority; or

a right-leaning alliance of EPP, ALDE and ECR: 347 MEPs – also short of a majority.

There will be intense talks behind the scenes now to discuss the forming of the coalition as well as the division of the portfolios in the next Commission. A first meeting of political leaders takes place today to discuss alliances. If the EP wants to be taken seriously and have a say in the appointment of the next Commission President, it needs to quickly come together behind a common candidate before the EU28 leaders decide on 20 – 21 June.

Some additional facts:

The 2019 EP elections have seen an increase in voter turnout, from 42.61% in 2014 up to 50.95%. However, voter turnout in EU elections still pales in comparison to average turnout in national elections, (around 66%).

Voter turnout is often highest in those countries with compulsory voting;, such as Belgium and Luxembourg (asides from Malta, which had a very high turnout of 72.6%)

We are also seeing a significant changeover in personnel in the representatives in the European Parliament. With roughly 60% of the MEPs sitting in the EP for the first time. meaning that it will take time for the new MEPs to get up to speed; and

There is limited increase in gender balance (up to 37% from 35% in 2014).

2. Key observations/analysis in critical Member States

Germany

Germany has 96 seats in the EP, making it a key in terms of size and influence in the EU. Chancellor Merkel’s CDU party came first with 29 MEPs, making the German delegation – again – the biggest in the EPP, despite this being its worst result in an EP election.

The biggest surprise came from the Greens, who came second with an unprecedented 22 MEPs. The far-right, xenophobic party Alternative für Deutschland (AfD) saw a significant increase in terms of number of MEPs as compared to the last mandate (11 from 1 in 2014) although less than predicted in many polls.

Both the Socialists (SPD) and left (Die Linke) saw a decline in the number of MEPs, with 16 (down from 27) and 5 (down from 8) respectively.

France

France is indisputably an important Member State sending 74 MEPs to the European Parliament (79 when the UK will be out of the EU). As predicted, Marine Le Pen’s party (RN, formerly FN), came first with 22 seats (1 seat less than in 2014). President Macron made this election a personal test for his movement En Marche (LREM) and although LREM only just lost out, with 21 seats, his inability to defeat RN has sparked controversy in France with many parties calling on him to change his political direction in France. Both RN and LREM are expected to play a significant role in their EU level political groupings, with RN a significant delegation in the ENF and LREM to align with ALDE.

The big surprise in France was the Green party (EELV), which came third with 12 seats. This result, overlooked by the pollsters, make EELV the first force on the left-side of the political spectrum. Despite the poor result for the Socialist Party (PS) with only 5 seats, these leading left-leaning parties together with far-left party La France Insoumise (6 seats), will send a total of 23 MEPs to Brussels, i.e. one more than the RN.

This election saw the collapse of the French Republican Party (LR), a member of the EPP, which came in fourth with 8 MEPs – down from 20 MEPs in the previous mandate.

French politicians from LREM are calling for a French EC President and Michel Barnier’s name is being repeatedly mentioned, including by Macron. Barnier, currently EU Chief Brexit Negotiator, is still officially a member of LR (and therefore EPP). Despite his national political affiliation, he is close to President Macron and his role in the Brexit negotiations has given him the stature of a true European political figure, beyond party politics.

The UK

Former UKIP MEP Nigel Farage’s Brexit Party, which was formed only in April, leads with 29 seats. The pro-second referendum Liberal Democrats have seen a surge in support, with 16 MEPs compared to 1 in 2014, as have the Greens who increased their representation to 7 MEPs. Given the electorate’s frustrations over how Labour and the governing Conservative Party have handled Brexit, it is not surprising that they have suffered significant losses. In Scotland, the Scottish National Party, which is a member of the Greens grouping at EU level, won 3 of the 6 seats available.

As explained in our recent blogpost, the UK result is likely to have two consequences:

It will strongly signal that the majority of voters in the UK are dissatisfied with the UK government’s handling of Brexit and that a large minority would seem to be in favour of leaving the EU on WTO terms; and

It will impact the size of the EP’s political groups exactly when it matters most: key decisions, such as the appointment of the lead positions in the EC and EP taking place prior to when the UK is scheduled to leave.

It remains to be seen what kind of role the UK MEPs will assume in the EP, especially given that they are currently only intended to hold office until 31 October 2019, but we consider it unlikely that they would be in the running for key positions in the committees. In addition, depending on when the UK MEPs leave (i.e. 31 October or at a later stage), MEPs may decide that a reshuffle of key positions and groups may be necessary.

Italy

Tied with the UK, Italy sends the third largest number of MEPs to Brussels (73). Like France and the UK, Eurosceptic parties gained the most seats. Interior Minister Matteo Salvini’s party Lega, a member of ENF, came first with a total of 28 MEPs and the 5-Star Movement, a member of the EFDD, came third with 14 MEPs (less than previously anticipated). What sets Italy apart, however, is that its Eurosceptic parties are currently in government.

To the surprise of many, the Italian Socialists (PD) managed to come second and hold on to 19 MEPs (down from 26 in 2014).The positive result for the PD indicates there is perhaps a certain fatigue among Italian voters for the current government and that pro-European voices can still be heard. Italian MEPs were the biggest S&D delegation in the past mandate (with 31 MEPs) meaning that they will lose their influence there.

Spain

Spain, which has a total of 54 seats, is one of the few large Member States where the Socialists (PSOE) came first (confirming the trend after national elections a couple of weeks ago) with 20 MEPs, making Spain the biggest delegation in the S&D group. The centre-right PP came second with 12 MEPs who will join the EPP (down from 17 in 2014), while the Liberal party Ciudadanos, one of Macron’s LREM closest allies in Europe, came third meaning that there will be 8 Spanish MEPs in the ALDE group.

In Spain, the new element is the election of far-right MEPs (Vox) – these 5 MEPs will probably join one of the two main Eurosceptic groups. It is the first time since the end of the Franco dictatorship that Spain elects far-right politicians (they also entered the national Parliament a few weeks ago).

The Netherlands

Whilst the Netherlands only has 26 seats in the European Parliament, the outcome of the elections is remarkable in a number of ways.

Even though the Dutch Social-Democrats have been polling very low domestically, the politician heading their list for the EP has led the way to a surprise victory. S&D Spitzenkandidat Frans Timmermans was the reason Dutch voters awarded the PvdA with 6 seats, unexpectedly ahead of the governing coalition made up of right-leaning Liberals (VVD) and Christian-Democrats (CDA) (4 seats each). This bodes well for Timmermans’ standing in the negotiations on the top jobs, for which he’ll need the Dutch government’s endorsement.

The predicted EU-wide landslide for the Eurosceptics has not taken hold in the Netherlands. Far-left SP and Geert Wilders’ far-right, xenophobic party PVV both failed to get any MEPs, while a new Eurosceptic party FvD, which will join the ECR, gained 3 seats – less than the 7 predicted.

What is the impact for business and what can we predict about future coalition building on policy?

When it comes to policy making, it seems clear that an agreement on the future agenda will be a pre-requisite for groups to form a working coalition and later decide on top jobs. When it comes to the EU priorities for the next mandate, we see a few overarching themes at the forefront:

Sustainability, including carbon emission reduction, financing the climate transition, shifting the transport mix and greening the agriculture: The Greens’ surge will reinforce a trend we have seen recently: sustainability is now everywhere. This will be especially true if the Greens are going to do a deal in support of a big coalition in the EP, where they might exact a price in both policy terms and be rewarded with one or more top jobs.

Digitisation, including platform regulation, artificial intelligence and use of data: With an increased number of Greens and Liberals, who tend to favour enhanced privacy standards, we can expect more tension between innovation and fundamental rights.

Taxation, including a minimum tax, a digital tax and a green tax (e.g. a tax on aviation and/or carbon): Being strong on business taxation is another theme that is here to stay, as all parties chimed in with (especially) Margrethe Vestager’s rhetoric, and the new Parliament may see the creation of a permanent subcommittee on (business) taxation.

The international role of the EU, including trade policies that protect EU interests and competition:

What does the new composition promise for the future FTA with the UK as a third country? Having more Eurosceptics and Greens, may mean that getting a deal through could become more difficult.

‘Tough on China’ was an element in all main candidates’ election manifestos and the current line, which is also supported by the main capitals, will continue to resonate in the European Parliament. This may mean easing State aid rules for R&D and innovation, to help EU companies compete. It will also mean a review of procurement rules vis-à-vis third country bidders. And Europe will want more reciprocity, to allow it access to Chinese markets.

As to a review of EU competition rules, especially for merger reviews, even though the Christian-Democrats strongly supported this, we don’t expect this to be a theme for much longer. The other Parliamentary groups were at best lukewarm on the issue, and several influential governments have taken position against it in the meantime.

4. What is the impact on the choice for a common Spitzenkandidat?

While the EPP has the most seats in the European Parliament, they suffered a significant loss and can no longer enter into a governing arrangement with a single grouping. The S&D also lost a significant number of MEPs but their size relative to the EPP is only marginally reduced. In addition, the third and fourth largest parties (ALDE and Greens) have now seen their relative size increase. This will mean not only greater competition over the key positions (particularly President of the EC, Council and European Central Bank) but also top political priorities (see section 3).

EPP Spitzenkandidat Manfred Weber’s chances of becoming EC President are reducing, although his party is officially calling for his appointment, with the open support of Chancellor Merkel. However, he is not the favoured candidate of the liberals/centre-left for a number of reasons, including his position on Hungarian Prime Minister Viktor Orban’s inclusion in the EPP grouping, and so the EU 28 leaders may be minded to go for someone with a broader appeal. In the past, MEPs and EU leaders tended to be wary of appointing an EC President from one of the biggest Member States.

If Weber is not chosen, it is not certain that the alternative would be one of the other Spitzenkandidaten, such as Danish Liberal Margrethe Vestager or Dutch Socialist Frans Timmermans. The former’s chances have improved given the massive gains of the Liberals and her firm position when it comes to regulating multinationals and digital companies has made her popular beyond her own group, for instance with Green and S&D MEPs. Danish national elections will take place next week and it remains to be seen if her party will have an opportunity to form part of the governing coalition – considered unlikely at this moment. When it comes to Timmermans, his chances of success are not clear, although the victory of his party in the Netherlands gave him an advantage. Looking at the constellation of the new EP, with the biggest forces on the centre and slightly leaning to the left, Timmermans has the right profile as a moderate social-democrat who worked with the EPP in the last Commission.

If none of the current Spitzenkandidaten are selected, we will likely see increased signals that the EU28 leaders are pushing forward the candidacy of French Christian Democrat Michel Barnier (currently EU Chief Brexit Negotiator).Barnier is close to President Macron and his role in the Brexit negotiations has given him the stature of a true European political figure, beyond party politics. However, with UK Prime Minister May stepping down on 7 May and the possibility that she may be replaced by a Brexiteer (more likely after the EP election results in the UK), the EU may need Barnier to continue as EU negotiator. While it is still early days, some other names have been suggested, such as Belgian Liberal Charles Michel (outgoing Belgian Prime Minister).

5. What is the impact for Parliament’s key business committees and which former Commissioners, now MEPs, are likely to join these?

From the initial results, there does not appear to be a dramatic shift in terms of pro/anti-business MEPs. In practice, however, much will depend on how the Parliamentary committees are formed and who takes up the key positions. We would expect the Liberals and the Greens to fight for more leading roles and, while many will want to avoid a Eurosceptic MEP chairing a committee, their increased presence will make them harder to ignore.

During June, MEPs are expected to conclude behind-the-scenes negotiations on the composition of parliamentary committees, their chairs and co-ordinators and then formal appointments will be made during the first plenary on the week commencing 2 July (provided there is no delay).

6. Which Commissioners were elected as MEPs and what does this mean in practice?

Out of the 4 relevant Commissioners that stood for election - Valdis Dombrovskis, Commissioner for Financial Stability, Financial Services and Capital Markets Union, expected to join the Committee on Economic Affairs, Frans Timmermans, the Socialist Spitzenkandidat, Mariya Gabriel, Commissioner for Digital Economy and Society, expected to take a role in key digital files and Andrus Ansip, Vice-President for Digital Single Market, interested in cybersecurity issues - all of them have successfully been appointed as an MEP.

These individuals will step down from their EC duties immediately and take up their role in the Parliament. In theory, the Member State that has lost a Commissioner will re-appoint another one. In the event that this takes time, other existing Commissioners may assume a portfolio in addition to their own as an interim solution.